Final answer:
The market price is the best measure of fair value when allocation is needed in business as it takes into account supply and demand forces and reflects the perceived value of a product or service.
Step-by-step explanation:
The best measure of fair value when allocation is needed in business is the market price. Market price is determined by the forces of supply and demand in the marketplace and reflects the perceived value of a product or service. It takes into account various factors such as production costs, competition, consumer preferences, and market conditions.
For example, let's say a company produces a certain product at a cost of $10 per unit. However, due to high demand and limited supply, the market price for the product is $20 per unit. In this case, allocating the product based on market price would ensure that it goes to those who are willing to pay the highest amount, maximizing overall economic efficiency.
Other measures like historical cost or book value may not accurately reflect the current value of an asset or item and may not be suitable for allocation purposes.